01—Abstract
Summary
Summary of the 8-K filed April 16, 2024. Cited figures are marked; the original filing is the authoritative source.
Bank of America reported first-quarter 2024 net income of $6.7 billiona, or $0.76 per diluted share, versus $8.2 billion, or $0.94, in Q1 2023.
Results include a $700 millionb pretax accrual for the FDIC special assessment tied to the Silicon Valley Bank and Signature Bank failures. Excluding that charge, adjusted net income was $7.2 billion and adjusted EPS was $0.83. Total revenue, net of interest expense, was $25.8 billion, down 2% year over year, as net interest income fell 3% to $14.0 billion.
Higher deposit costs more than offset higher asset yields and modest loan growth, and fee income from investment banking and asset management rose. Credit quality weakened modestly. The provision for credit losses rose to $1.3 billionc from $931 million a year earlier, and net charge-offs reached $1.5 billion, a 0.58% ratio up from 0.32%.
Driving the increase were credit cards (3.62% loss rate) and commercial real estate office. Nonperforming loans rose to $5.9 billiond. Capital remained strong, with a CET1 ratio of 11.8% on the standardized approach, 184 bps above the regulatory minimum.
The bank returned $4.4 billion to shareholders through dividends and buybacks, and tangible book value per share rose 9% to $24.79. Segment results were mixed. Global Wealth and Investment Management posted record revenue of $5.6 billion, and Global Markets sales and trading revenue was flat at $5.1 billion, with the best first quarter in over a decade.
Consumer Banking revenue fell 5% on lower deposit balances, and Global Banking revenue fell 4%, though investment banking fees rose 35%. Management emphasized continued organic growth, including 21 consecutive quarters of consumer checking account growth.
02—Key points
Key Highlights
- Q1 2024 GAAP EPS of $0.76 fell from $0.94 a year earlier. Excluding the $0.07 impact of the $0.7 billion FDIC special assessment, adjusted EPS was $0.83.
- Revenue, net of interest expense, declined 2% to $25.8 billion, with net interest income down 3% to $14.0 billion as deposit costs rose faster than asset yields.
- Net charge-offs rose to $1.5 billion (0.58% ratio vs. 0.32%), driven by credit cards (3.62% loss rate) and commercial real estate office; the provision for credit losses reached $1.3 billion.
- CET1 ratio of 11.8% (standardized) and $197 billion of CET1 capital; $4.4 billion returned to shareholders via dividends and repurchases in the quarter.
- Book value per share rose 7% to $33.71 and tangible book value per share rose 9% to $24.79.
- Global Wealth and Investment Management reported record revenue of $5.6 billion (up 5%), with client balances near $4 trillion (up 13%).
- Global Markets sales and trading revenue was $5.1 billion (flat, +2% ex-DVA), with zero trading loss days and the best Q1 in over a decade; Global Banking investment banking fees rose 35%.
03—Questions
Frequently Asked Questions
How did the FDIC special assessment affect Bank of America's Q1 2024 results?
The FDIC increased its estimate of the loss to the Deposit Insurance Fund from the failures of Silicon Valley Bank and Signature Bank, so Bank of America recorded a $0.7 billion pretax noninterest expense accrual. This reduced net income by about $0.5 billion and diluted EPS by $0.07. Management presents adjusted figures that exclude the charge, showing adjusted net income of $7.2 billion and adjusted EPS of $0.83.
Is Bank of America's credit quality deteriorating?
Credit quality weakened modestly but remains within a manageable range. Net charge-offs rose to 0.58% of average loans from 0.32% a year earlier, led by credit cards (3.62%) and commercial real estate office. Nonperforming loans rose to 0.56% of loans. The allowance for loan and lease losses was 1.26% of loans, and the quarter included a net reserve release of $179 million, mainly in commercial.
Why did net interest income decline despite loan growth?
Net interest income fell 3% to $14.0 billion because higher deposit costs more than offset higher asset yields, modest loan growth, and higher NII from Global Markets activity. Average deposits declined in Consumer Banking and GWIM, and the net interest yield fell 21 bps year over year to 1.99%.
What is the capital position and shareholder return outlook?
The CET1 ratio was 11.8% on the standardized approach, 184 bps above the regulatory minimum, and CET1 capital reached $197 billion. The company paid $1.9 billion in common dividends and repurchased $2.5 billion of common stock in the quarter. Regulatory capital ratios for March 31, 2024 are preliminary, and the filing does not give forward guidance on buybacks.
Which business segments drove performance this quarter?
Global Wealth and Investment Management was the standout, with record revenue of $5.6 billion and net income of $1.0 billion. Global Markets earned $1.7 billion in net income, and Global Banking earned $2.0 billion, with investment banking fees up 35%. Consumer Banking net income fell to $2.7 billion on lower deposit balances and higher credit losses.
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